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The government will probably stump up around $100 million in fees to investment banks preparing the partial sell-down of state-owned energy companies, according to State-Owned Enterprises Minister Tony Ryall.He told a media briefing in Wellington the mixed ownership model is a “very very big programme” but he wouldn’t expect to pay hundreds of millions of dollars for it. Rather it would be “more around $100 million.” That would work out to be around 1.8 percent of the sale price, which was in line with costs relating to the Contact Energy privatisation in 1999.
In June, Ryall told Parliament’s Commerce Select Committee the Treasury’s expected range of fees of between 2 percent and 9 percent was at the high end of the scale.
The government confirmed Mighty River Power as the first electricity generator and retailer to go to market, with a sale flagged for the third quarter next year. Treasury officials estimate the company could raise as much as $1.8 million.
Finance Minister Bill English said the government, as shareholder, is limited in what it can say due to securities market disclosure rules, but more information will be forthcoming in March or April next year once the lead manager has completed due diligence on the sale.
MRP, which operates under the retail brand Mercury Energy, is first off the rank due to its long-running chief executive Doug Heffernan and chairman Joan Withers being known to the market and its structure and scale being attractive investment opportunities.
“It’s a very good size to offer kiwis that should have very good interest to New Zealanders and sufficient scale to market,” Ryall said. MRP also has produced consistently better returns on capital than its two state-owned rivals and candidates for partial sale, Meridian and Genesis Energy.
The government hopes to raise as much as $7 billion by selling down minority stakes in Meridian, Genesis, MRP, coal miner Solid Energy, and Air New Zealand.
The sale programme will get legislative sign-off as part of the supply and confidence deal with United Future, which will remove the companies from the State Owned Enterprises Act and set a cap on the Crown’s level of ownership and how much a single entity can buy.
English talked down the threat to the programme caused by volatile global financial markets, saying the prospect of a steady return from utility companies was more attractive than other investment opportunities, and a better way to clamp down on new government debt.
He said he expects the companies will have New Zealand ownership of between 85 percent and 90 percent, with retail and institutional investors likely to divert property investment and some cash in term deposits into the shares.
Corporate iwi investors are likely to join institutional investors such as the New Zealand Superannuation Fund, Accident Compensation Corp’s investment portfolio and KiwiSaver funds when the allocations are determined, English said.
He confirmed no shareholder, other than the government, will be allowed to own more than 10 percent of the partially private-owned entities.